Monday, 6 July 2009

A wonderful graphic from the New York Times can be used to show what happens to growth in two dimensions:

x-axis: growth over the past 6 months (extremes show sharp swings in output, or sudden drops).y-axis: annual growth - long term trend (actual rate of decline in the economy).

Looking at that version of things, everything will be fine.

However, and this point was missed by the Economist's Free Exchange, this graphic suffers the same flaw as did the option-pricing model of Long Term Capital Management. That flaw, is that it only takes into account recent recessions, and so is unable to correctly predict the current, more serious one.

In other news, the markets have lost their shine (perhaps I'll post again on them, but not today).

Sunday, 7 June 2009

The pound reached 7 month highs against the dollar and the Euro, before falling away towards the end of the week (the BBC suspected it was the political instability here, I'm not convinced).

Anyway, the bare facts are below:

FTSE: 4438.56 (up 20.62 or 0.47% in 1 week, 25.71% in 13 weeks)

DOW: 8763.13 (up 262.80 or 3.09% in 1 week, 32.23% in 13)

£/$: 1.5982 (down 2.06¢ or 1.27% in 1 week, up 13.43% in 13)

£/€: 1.1440 (up 0.04¢ or 0.03% in 1 week, 2.71% in 13)

Oil in $: 68.37 (up $2.63 or 4.00% in 1 week, 56.35% in 13)

Oil in £: 42.78 (up £2.17 or 5.34% in 1 week, 37.84% in 13)

Oil in €: 48.94 (up €2.50 or 5.38% in 1 week, 41.57% in 13)

Gold in $: 962 (down $13 or 1.38% in 1 week, up 2.78% in 13)

Gold in £: 601.93 (down 68p or 0.11% in 1 week, 9.39% in 13)

Gold in €: 688.60 (down 54¢ or 0.08% in 1 week, 6.93% in 13)

All the usual good news signals, except that the pound fell against the dollar (or rather, the dollar rose against the Euro and pound, perhaps indicating a shift in perceptions as to the consequences of recovery on the value of the dollar in the longer term).

It is notable that the oil price and stock markets have shifted far more than gold and the currencies have. That gold hasn't fallen proves that many aren't convinced that "everything is going to be okay" but demand for oil is recovering, which means that the restrictions put into place by OPEC (to limit the oil price collapse) will start to bite.